Advice: Raise the rent or keep the tenant?

Discussion in 'Property Management' started by Pete Arendt, 21st Sep, 2018.

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  1. Pete Arendt

    Pete Arendt Well-Known Member

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    Advice: Raise the rent or keep the tenant?

    WHILE your property investment may look great on paper, things can quickly turn on their head if you’re faced with a tenant thinking about vacating because they’re being faced with a rental increase.

    Director and Founder of BuySide Buyers Agency Josh Masters said there are five factors to consider when faced with this dilemma.

    Is the rental market strong at the moment?

    “While we may like to stick to our guns and feel that we’re justified in increasing the rental amount, if there are a hundred properties on the market just like yours and demand is low then the chances of you scoring a new tenant at a higher rent could be difficult,” Mr Masters said.

    “Have a chat with your property manager to get their view on whether the property would rent out at the desired price.

    “While a $10 increase may not seem like much if the tenant looks around and can secure a similar property for $80 a week less than they’re paying now then they may feel that extra saving is worth the move.”

    Can I afford the loss if my tenants vacated?

    “While we may be keen to get that extra $10 or $20 increase for the year, this can quickly be wiped out if it takes you 2 or 3 weeks of vacancy at $700 or $800 per week,” Mr Masters said.

    “In good times or bad, you need to weigh up whether you can handle a potential loss of income upfront in order to get that additional pay-off over the longer term.”
     
    Pete Arendt, 21st Sep, 2018
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  2. Scott No Mates

    Scott No Mates Well-Known Member

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    If the tenant walks over a $10 increase, you will have to factor in the loss of $4k on the next tenant as well as 3-4 weeks lost rent and letting fees.

    It will take a long time to catch up.
     
    Scott No Mates, 21st Sep, 2018
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  3. jazzsidana

    jazzsidana Well-Known Member

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    Hire the best agency/property manager and let them help you decide based on facts...

    Moto - keep things simple!..

    Surround yourself with great team and see magic happen!...

    Cheers,
     
    jazzsidana, 21st Sep, 2018
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  4. mikey7

    mikey7 Well-Known Member

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    When we were renting a place prior to looking for our PPOR, the landlord wanted to raise rent from $550 to $575/wk. We resisted and said we'd leave if they did (we could literally move next door for $540/wk for a mirror image townhouse). They insisted, and thankfully we found our PPOR much sooner than expected and moved out before the raise. They struggled to get a tenant, and eventually got one at $525/wk.
    Don't get greedy.
     
    mikey7, 21st Sep, 2018
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  5. Ricki barkham

    Ricki barkham Well-Known Member

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    Don't forget a leasing fee of 400 when tennets leave so loose more money
     
    Ricki barkham, 22nd Sep, 2018
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  6. jazzsidana

    jazzsidana Well-Known Member

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    It's silly on behalf of landlords esp. when market comparison clearly proves it...

    Basic math will verify it's not worth it and not to mention letting/advertising fee that landlords have to pay..
     
    jazzsidana, 22nd Sep, 2018
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  7. wylie

    wylie Moderator Staff Member

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    In my experience as a self-managing landlord, you can be caught out by not raising the rent in line with the market. But we prefer to keep a good tenant and, depending on the tenant's circumstances, make a small raise (and often not at all if the rents are flat).

    We understand if we lose a tenant over a $10 per week rise, we lose much more than what that increase would have put in our pockets had they stayed.

    I gauge rents in the area as each lease is getting to the end.

    But while we've found at times we are under the market, usually tenants don't stay more than two or three years, so we've not often been caught for too long under market.

    But we've just had tenants leave who'd been there for about eight years (two houses). Both lots of tenants had been very happy for us to organise a DA while they were there. That entailed surveyors, architects, town planners etc traipsing in the yard (mostly) but also entering the house to measure, several different times.

    We chose not to raise the rent for these houses for the past four years or so (except when we added air-con and bumped it up marginally) because we didn't want to price them out, find new tenants and then say "sorry, out you go, we have to lift the house", and also because our tenants were so understanding in allowing so many different people to intrude into their "quiet enjoyment".

    Also, during this time, I'd look at what they could rent in the area, and I do believe we were getting good rent compared to what they could find if they started looking.

    And going the other way, we had a house that we increased the rent each new lease by $5 or $10 but had not realised (too busy with other things) that rents had flattened in this area due to hundreds of new apartments coming on the rental market.

    We'd agreed that we would release these tenants when they bought their own house, and did so happily, but then realised the rents were so flat we ended up dropping $20 each week until we rented it just over $100 less than we'd been getting. Ouch!

    It has taken time for all those apartments to fill up, and now we are back up to what we were getting four years ago.
     
    wylie, 22nd Sep, 2018
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    Tom Rivera likes this.